Why is no one buy­ing Ho­tel Taj Mans­ingh?

Hindustan Times (Chandigarh) - Estates - - NEWS - Bidya Sa­pam bidya.s@htlive.com

MUM­BAI : Af­ter seven years of court cases and po­lit­i­cal in­trigue, the New Delhi Mu­nic­i­pal Coun­cil’s (NDMC’s) auc­tion for the cap­i­tal’s iconic Taj Ma­hal Ho­tel, or Taj Mans­ingh has once again been post­poned to 18 July. Will this sell-off go the Air In­dia way?

Why didn’t NDMC ex­tend In­dian Ho­tels Co. Ltd’s lease?

The Taj Mans­ingh was opened in 1978 af­ter Tat a group firm In­dian Ho­tels en­tered a 33-year con­tract lease with NDMC. Af­ter the con­tract ex­pired in 2011, In­dian Ho­tels op­er­at­ing li­cence was ex­tended nine times. Fi­nally, in an ef­fort to raise more rev­enue, ND MC de­cided to find a new op­er­a­tor through an auc­tion, giv­ing In­dian Ho­tels the right of first re­fusal. This was chal­lenged by In­dian Ho­tels in the Delhi high court and then the Supreme Court. The apex court gave a go-ahead for the auc­tion, turn­ing down In­dian Ho­tels’s plea to ex­tend its lease term.

What is the cur­rent sta­tus of the Taj Mans­ingh auc­tion?

The auc­tion dates for the ho­tel, also known as the Taj Mans­ingh, have been re­vised twice in the last six months.

Ini­tially sched­uled for 30 Jan­uary, the auc­tion was post­poned af­ter sev­eral hote­liers ob­jected to the strin­gent bid­ding norms. While 3-4 play­ers were ini­tially be­lieved to be in­ter­ested in the auc­tion, which was fi­nally held on 20 June, only two ul­ti­mately par­tic­i­pated. ITC’s bid was elim­i­nated on tech­ni­cal rea­sons. As In­dian Ho­tels was the sole re­main­ing bid­der, the auc­tion had to be an­nulled.

Why is In­dian Ho­tels chal­leng­ing the Taj Mans­ingh auc­tion?

Many hos­pi­tal­ity groups have their eye on the lux­ury ho­tel, lo­cated in a prime area. Los­ing it would be both a fi­nan­cial and strate­gic blow to the Tata group.

If the ho­tel is such a catch, why isn’t any­one bid­ding for it?

Given ND MC’s auc­tion terms, three In­dian firms could be in the fray—In­dian Ho­tels, IT C Ltd and Oberoi Group’s EIH Ltd. The terms were re­cently re­vised to let a bid­der hold up to 20% in a com­pet­ing firm which is also tak­ing part in the auc­tion. ITC holds 14.98% i nEIH, mean­ing both can now par­tic­i­pate. How­ever, it ap­pears the strin­gent terms have not found favour with the bid­ders, leav­ing only In­dian Ho­tels in the fray for now.

Who are the win­ners and losers in this long saga?

The win­ner maybe open to in­ter­pre­ta­tion, but the loser is cer­tainly NDMC. A suc­cess­ful auc­tion could gen­er­ate an up front amount of Rs 300-400 crore and an an­nual lease amount of Rs 30-40 crore, ac­cord­ing to es­ti­mates. NDMC’s an­nual bud­get is about Rs 3,600 crore.

The push to auc­tion be­gan be­cause it hoped to mon­e­tize the as­set on bet­ter terms. As things stand, that’s not hap­pen­ing.

MINT/FILE

Ho­tel Taj Mans­ingh

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